INDIANAPOLIS – State lawmakers received a promising revenue forecast Monday – but it's still not enough to cover all of the state's needs.
That is largely because of an anticipated massive increase in funding to the Indiana Department of Child Services and a jump in Medicaid costs.
Overall, if legislators give DCS and Medicaid their full requests, it leaves only $35 million in new tax revenue for all other state needs in the first year of the next two-year budget. In the second year, there would be a deficit of $23 million.
That doesn't even contemplate increases for Indiana schools, inflationary state agency increases or school safety funding.
“We have a lot of extra money that is going to DCS right away so it makes the other issues that much tougher,” said House Ways and Means Chairman Tim Brown, R-Crawfordsville.
The revenue forecast shows the state should receive about $828 million in new tax collections over the biennium.
But the DCS is seeking $286 million in new funding each year as it struggles to meet the needs of Indiana's abused and neglected children. And the Medicaid program needs about $120 million each year in new dollars.
Senate Appropriations Chairman Ryan Mishler, R-Bremen, said the DCS request could take up 64 percent of the new revenue in the first year and 74 percent in the second year. Lawmakers need to meet with DCS officials and find a way to be more efficient and lower that number, he said.
“Another thing to look at,” he said, “I think we are at our (revenue) peak. You can see where we are going to start trending downward in a couple of years, so that's something we have to consider.”
The news puts plans for an appreciable teacher pay raise in jeopardy. Every 1 percent of K-12 funding increase costs about $70 million.
Brown said local school boards determine pay raises. But lawmakers first have to fund operations.
Micah Vincent, director of the Indiana Office of Management and Budget, said the administration will work to introduce a budget that maintains reserves and is fiscally prudent.
“There is a lot to consider as we prepare the governor's budget submission in January,” he said.